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As discussed in our previous December 2016 White Paper and January 2016 Commentary, pursuant to its JCPOA commitments, the United States—through a combination of waivers, partial or complete revocation of executive orders, commitments to refrain from imposing sanctions measures, and agency findings: (i) lifted its nuclear-related secondary, or extraterritorial, sanctions that had been imposed on certain Iranian industries, services, and trade; (ii) removed certain individuals and entities identified in the JCPOA from its sanctions-related prohibited parties lists; and (iii) issued General License H to the Iranian Transactions and Sanctions Regulations authorizing U.S.-owned or -controlled foreign entities to engage in certain activities involving Iran, subject to a number of limitations. As a result, since January 16, 2016, non-U.S. companies and U.S.-owned or -controlled foreign entities have been able to engage in a broad range of transactions involving Iran that previously would have resulted in the violation of or liability under U.S. sanctions. Many such companies have taken advantage of the expanded array of permissible activities and are engaging in business dealings with or involving Iran. Under the strictures of the JCPOA, however, the lifted sanctions can be "snapped back," and General License H could be revoked if Iran is determined to have breached its obligations under the JCPOA.

When the JCPOA was implemented in January 2016, OFAC issued JCPOA-specific FAQs that generally addressed the "snapback" of the sanctions lifted under the JCPOA. OFAC now has revised JCPOA FAQs M.4[1] and M.5 to provide more information regarding whether there will be a wind-down period for non-U.S. and U.S. companies engaging in authorized transactions with Iran if the sanctions are snapped back. Although the revisions to JCPOA FAQ M.4 do not offer any substantive changes, the revisions to JCPOA FAQ M.5 provide updated and significant guidance regarding the likely wind-down process in the event sanctions snap back.

In the previous version of JCPOA FAQ M.5, OFAC simply noted that the U.S. government "has a past practice of working with U.S. or third-country companies to minimize the impact of sanctions on the legitimate activities of those parties undertaken prior to the imposition of sanctions, and we anticipate doing the same in the event of a JCPOA sanctions snapback."

The revised JCPOA FAQ M.5 provides that if there is a JCPOA sanctions snapback, the U.S. government will "provide non-U.S., non-Iranian persons a 180-day period to wind down operations in or business involving Iran that was consistent with the U.S. sanctions lifting under the JCPOA and undertaken pursuant to a written contract or written agreement entered into prior to snapback." Similarly, if the snapback results in general or specific licenses being revoked, the U.S. government would provide U.S. persons and U.S.-owned or -controlled foreign entities 180 days to wind down operations in or business involving Iran conducted pursuant to such licenses

The JCPOA FAQ also provides that non-U.S., non-Iranian persons who are owed payment at the time of snapback may receive those payments, subject to certain conditions, for: (i) goods or services fully provided or delivered to an Iranian counterparty or (ii) loans or credit extended to an Iranian counterparty pursuant to a written contract or written agreement entered into prior to snapback and "consistent with U.S. sanctions in effect at the time of delivery or provision … or at the time the loans or credits were extended." U.S. persons and U.S.-owned or -controlled foreign entities also will be authorized to receive such payments owed, subject to such payments being consistent with U.S. sanctions.

Of note, companies engaged in wind-down activities in the event of a snapback could face the imposition of sanctions for providing or delivering additional goods or services and/or extending additional loans or credits to an Iranian counterparty after the snapback, including pursuant to written contracts or written agreements entered into prior to the snapback, except for those goods or services necessary to wind down operations involving Iran.